At oral arguments, Supreme Court isn’t sold on Aereo

Court shows concern about the cloud, but not about the right to free TV.

It's impossible to know from today's oral arguments how the Supreme Court case about TV-over-Internet startup Aereo will turn out. But overall, it didn't look too good for Aereo.

Several justices made clear their concern about issuing a ruling that could hurt other cloud computing companies. Justice Sonia Sotomayor mentioned Dropbox specifically. "What does the Court do to avoid a definition or an acceptance of a definition that might make those people liable?" she asked Paul Clement, the lawyer representing ABC and other TV networks.

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Clement explained there's a "fundamental difference" between Aereo and a simple storage service, similar to the difference "between a car dealer and a valet parking service." If you show up to the car dealer without a car, you can get one. "If I show up to the valet parking service and I don't own a car, it's not going to end well for me."

Similarly, Clement explained how the justices could ban Aereo while upholding the 2008 Cablevision legal precedent, which legalized remote DVRs. The preference of Clement's broadcaster clients would be that Cablevision was overturned altogether, but a few justices asked questions suggesting they at least wanted to explore ways in which Cablevision might stand. With Cablevision, Clement explained, the US Court of Appeals for the 2nd Circuit had allowed a company to add DVR services to contents that it had paid for rights to. Aereo, by contrast, is unlicensed.

He described Aereo as a kind of wanton-lawbreaker version of a cable company running remote DVRs:

"Aereo is like if Cablevision, having won in the Second Circuit, decides: 'Whew, we won, so guess what? Going forward, we're going to dispense with all these licenses.'"

Overall, Aereo portrayed itself as simply being a more efficient version of an antenna and a DVR. The TV broadcasters, meanwhile, tried to portray Aereo as a company that's giving consumers content they wouldn't otherwise have.

Unfortunately for Aereo, the US Solicitor General weighed in on the side of the TV companies, suggesting an approach that could carve out a space to make cloud storage legal while shutting down Aereo.

"The basic distinction... is the distinction between the company... that provides content in the first instance and the company that provides consumers with access to content that they already have," said Deputy Solicitor General Malcolm Stewart, who argued after Clement.

At times during the argument it seemed like the idea that consumers had rights to any kind of free television had been forgotten altogether. Stewart talked about Cablevision having been decided appropriately because it dealt with "subscribers who were already entitled to view [programs] in real time."

"You are the only player so far... that doesn't pay"

When Aereo's lawyer, David Frederick, stepped up to the podium, a fair amount of time was spent discussing the technical aspects of the thousands of antennas.

"Was Judge Chin right when he said there was no technically sound reason to use these multiple antennas?" asked Justice Ruth Ginsburg. "That the only reason for that was to avoid the breach of the Copyright Act?"

Frederick spent a fair bit of time defending the practice of using individual antennas on technical grounds. "There are technical reasons why individual antennas provide the same utility at lower costs and functionality than one big antenna," responded Frederick.

Efficiency "is not a consideration under the Copyright Act," noted Frederick, who then went on to defend the efficiency of the system. That just led to further, and more intense, questioning by Chief Justice Roberts. It's mystifying why Frederick didn't simply say what Aereo CEO Chet Kanojia has said about the arrays of antennas: they're required for legal compliance.

Justice Antonin Scalia asked Frederick if Aereo could go ahead and broadcast widely, instead of merely to local markets. "It does not implicate the private performance and public performance distinction," said Frederick. "Even if you were to take distant signals and make them available in the home, it's still through a user-initiated, user-specific copy of distant programming."

That may be a legally correct argument, but it also seems like one that missed the justice's primary concern. What Scalia was really asking was, how many different lines of business does Aereo think it can get into and avoid paying copyright fees? Rebroadcasting non-local signals would require paying retransmission fees, and it seems like it would have been an opportune time to acknowledge that.

It was the same concern that Ginsburg got to a moment later.

"If every other transmitter does pay a royalty—maybe it's under compulsory license—and you are the only player so far that doesn't pay any royalties at any stage," she noted.

"The person who sells an antenna to me at the local Radio Shack doesn't pay copyright royalties either," said Frederick. Aereo's case was simply one of "how long the cord is" between the antenna, DVR, and user.

The justices didn't see it that simply, though.

"What the local antenna person doesn't do but you apparently could do... is with the same kind of device pick up every television signal in the world and send it... into a person's computer," said Justice Stephen Breyer. "And that sounds so much like what a CATV (Community Antenna TV) system does or what a satellite system does that it looks as if somehow you are escaping a constraint that's imposed upon them. That's what disturbs everyone.

"And then what disturbs me on the other side is I don't understand what the decision for you or against you when I write it is going to do to all kinds of other technologies."

The justices seemed to think of Aereo as being more like a cable system, or an Internet system that should require licensing, like Netflix or Hulu. "AT&T's system, Netflix, Hulu, all of those systems get their content and they don't push it down to you," said Sotomayor. "They do exactly what you do. They let you choose what you want to see."

Justice Elena Kagan noted that "from a user's perspective, it's exactly the same as if I'm watching cable."

It should be re-emphasized that it's hard to read into what a final decision will look like based on questions from Supreme Court justices. But the back-and-forth today did seem to suggest great skepticism towards the idea that Aereo should be allowed to exist wholly unlicensed by the content side of television. When cloud computing was discussed—Breyer brought it up repeatedly—it seemed to be with an eye towards how a solution wouldn't damage other companies, not Aereo.